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Internet, games, start-ups & business.
Internet, games, start-ups & business.
Recent estimates value the global games business somewhere in the range of $50 billion. But if you factor in the booming online gaming sector and look at the total market caps for all public companies, the global games industry is actually worth about double that, according to investment banker Paul Heydon of Avista Partners. During a talk at Edinburgh Interactive, Heydon outlined the video game sector as he sees it. He noted that the total market cap of all public games companies globally had reached $105 billion and that online games (MMO, social/casual games, etc.) are now worth around 71% of the non-Nintendo PC/console sector. Heydon breaks down the global games market as follows: See Industry Gamers for more. Incidentally, $100 billion is how much the U.S. military wants to cut in spending over the next five years.
Dave McClure: http://500hats.typepad.com/500blogs/2010/07/moneyball-for-startups.html In summary, you should be thinking about stages for risk-reduction & company value creation that look like this: 1) Product: $0-100K, 3-6 months to develop basic MVP that’s functional & useful for at least a few customers. Get to small product/market fit. 2) Market: $100K-$2M, 6-12 months to test marketing & distribution channels, understand scalability & customer acquisition cost, conversion to some non-zero revenue event. Get to large product/market fit. 3) Revenue: $1-5M, 6-24 months to optimize product/market fit and get to cash-flow positive. I might edit this a little bit, as i’m in a rush to finish publishing and get back to other projects, but i think this has captured most of what i wanted to say for now. Appreciate feedback & commentary on anything that doesn’t make sense, could be improved, or can be streamlined.
Jermey Liew http://mashable.com/2010/08/17/social-games-business/ These are interesting times in the social gaming industry. Two weeks ago Disney acquired Playdom, and last week Google acquired Slide. Just like that, two of the largest social game publishers have become part of larger companies. This activity all comes on the heels of EA’s acquisition of Playfish late last year. Social gaming, as a category, has grown incredibly quickly, becoming one of the dominant drivers of usage on Facebook, and an increasingly core component of people’s entertainment. This growth represents a real threat to other forms of entertainment, and has precipitated the three deals that we have seen so far. The acquisitions show three commonalities. The first is strong management. Playfish is run by Kristian Segerstrale, a co-founder of Glu Mobile, a leading mobile game publisher. Playdom is run by John Pleasants, formerly COO of EA. And Slide’s CEO is Max Levchin, a co-founder of PayPal. In each case, the leadership brings real experience, not just in social gaming, but also from previous successes. The second is revenue scale. Each company was generating millions in monthly revenue at the time of acquisition, with valuations on exit being driven higher for the companies with the highest revenue at time of exit. To move the needle for companies as big as Google, Disney and EA, an acquisition needs to show the potential to drive hundreds of millions in annual revenue within a few years. The third is capacity for repeatability. Games are a hit-driven business. While it is valuable to have a hit game, it is much more valuable to have a game factory that can repeatably produce more successes. There is uncertainty about the chances of any given game being a hit, so part of repeatability is about a company’s ability to take many shots on goal. The more studios and game developers that a company has, the more shots on goal it can take at any given time. At time of exit, each company had hundreds of employees building games, and had multiple games at some level of revenue or usage scale. However, the ability to take a lot of shots on goal is not enough. The other key driver of repeatability involves helping a game reliably find a scale audience. This can come from a large installed base of players, or from the ability to justify paid customer acquisition through high monetization. Each company had one or more of these abilities when they were acquired. Social Games Have Value for Different Types of Companies The three acquisitions also differ in some meaningful ways. Each acquirer comes from a different category. One is a traditional game publisher (EA), one a traditional media company (Disney), and one a large Internet company (Google). This gives us some clues about what other companies may have interest in the sector. Potential future acquisitions might come from companies like Ubisoft and Activision from the game side, Viacom, CBS, Comcast/NBC and Newscorp on the media side, and companies such as AOL, IAC, Microsoftand Yahoo! from the Internet side. In addition, given the success of free to play games in Asia, there are a number of potential Chinese (Shanda, QQ), Japanese (Mixi, DeNA) and Korean (SK Telecom, Nexon) companies who could look to one of these social gaming companies to establish a market in the U.S. While there are many entities that might be in the market to buy a gaming company, there are only four still independent U.S.-based social game publishers that have the revenue scale (more than $1 million each month) to be attractive as a target; Rockyou, Crowdstar, Watercooler and of course Zynga. Zynga is the industry powerhouse, and we’ve estimated in the past that they are doing more than $60 million a month in revenue. They benefit from the ability to support multiple large development studios building high quality games, and to launch those games with significant marketing budgets and unparalleled cross promotional reach. Their 200 million monthly active users is four times the size of their closest competitors. This allows Zynga to quickly hook millions of users on its new games within days of launch, as they have recently demonstrated with Frontierville and Treasure Isle. This is something that no other company is currently able to match. But given estimates of Softbank’s investment in Zynga at a $4 billion valuation range, they may be too big an acquisition for many of the potential buyers. While many companies might wish to own them, they may be more likely to be on a track to go public themselves. On the other hand, the other three companies may see a lot of interest over the next 12 to 18 months. In this game of musical chairs, there are far more players than there are chairs, and when the music stops, many of the potential acquirers may find themselves with no where to sit.Which Acquisition Will Be Next?
Google is widely expected to soon announce a new social network service to compete with Facebook’s runaway growth. But CEO Eric Schmidt says Google’s social effort, widely rumored to be dubbed “Google Me,” won’t be a Facebook knock-off. Instead, Schmidt has described Google’s evolving social strategy as more about using games and other social features to make existing products like search, Gmail, its Android smartphone operating system and its Chrome web browser better tuned to people’s relationships, and therefore, more popular. “The world does not need another Facebook,” he told reporters at a recent tech conference. “It needs the technologies around friends and relationships to be allied to everything.” With Facebook using games like Farmville and Mafia Wars to help push its membership beyond 500 million people, Google recently announced it is buying San Francisco-based Slide, a social entertainment company that created SuperPoke! and other popular applications on Facebook. Many observers believe Google is planning to use social games to lure users, just as Facebook used Zynga games like Farmville to attract millions of new adherents — speculation that grew stronger Friday as Google bought Jambool, a company that could serve as a global cash register for a Google social platform. http://www.mercurynews.com/ci_15773462?IADID=Search-www.mercurynews.com-www.mercurynews.com&nclick_check=1
